Phoenix Mecano AG

1975–2002

Phoenix Mecano AG produces a variety of electrotechnical and mechanical components. The company has divisions producing Enclosures, or housings, for electronic devices (fabricated from plastic, aluminum, and fiberglass); Electromechanical Components (including terminals and connector systems); Mechanical Components (sensors, industrial clamps, mechanical parts); and Electronic Contract Manufacturing (of telecommunication and medical technology devices). Mechanical Components, with 39 percent of 2002 revenues, is the largest division. The company prides itself on paying attention to the oft-neglected design of commonplace components. Customers include producers of machinery, electronics, and medical equipment. Most sales come from Europe, with Germany accounting for more than 40 percent. The family of Dr. H. Christian Goldkamp holds a 29 percent stake in the company.

Origins

The company's history can be traced back to 1975, with the formation of Phoenix Maschinentechnik AG. Its first line of business was producing welding gases. Company leaders soon spotted an opportunity in producing welding torches as well.

Phoenix Mecano, which was based in Stein am Rhein, Switzerland, soon bought Rose Elektrotechnik GmbH und Co KG, a West German manufacturing company. It would make more than a dozen acquisitions in the next 15 years, including Alexander Binzel und Co., a producer of industrial gases.

In the 1980s, the company specialized in manufacturing metal containers, and supplying welding and technical gases. Annual turnover in the middle of the decade (1986) was SFr 111.8 million, producing a net profit of SFr 5.5 million.

Public in 1988

To reflect its wider focus, the company was renamed Phoenix Mecano AG in 1986. The Zurich stock market began listing the company's shares in September 1988. The Goldkamp family, including Chairman Hermann Goldkamp, owned 30 percent of the company.

During the year, Phoenix had acquired a controlling interest in RK Rose + Krieger, a maker of terminal components, assembly systems, and other mechanical components. In 1989, PTR, a producer of plug connectors and terminal clamps, was acquired.

Annual turnover in the middle of the decade (1986) was SFr 111.8 million, producing a net profit of SFr 5.5 million.

1990–1999

Turnover rose 19 percent to SFr 203 million in fiscal 1990. While the casing technology division accounted for about 70 percent of sales; the electromechanical and mechanical components division reported the strongest growth, up 70 percent. During the year, Phoenix Mecano had sold off welding technology units in North America, reducing the importance of that sector. The company employed more than 900 people in 14 subsidiaries; the holding company had a staff of just three.

Kundisch, a SFr 9 million producer of keyboards, was acquired in 1991. The next year the company bought Dewert, which made linear drives and had sales of SFr 50 million a year.

Strategic Acquisitions in the 1990s

Apart from an office furniture venture started in the early 1990s, the company had chosen a path that would suit it well throughout the decade. It was acquiring manufacturers of components that larger companies overlooked, at the same time devoting its attention to adding value and innovation.

By this time, Phoenix had acquired Bopla Gehäuse Systeme GmbH, a maker of enclosures to complement its Rose Elektrotechnik GmbH und Co KG subsidiary, which was bought in the mid-1970s. It also had bought a company called Hartmann, which produced coding switches; this subsidiary's sales reached SFr 15.4 million in 1992.

Longtime director Peter E. Rued was appointed to the newly created position of president in October 1992. Phoenix Mecano acquired Budapest's PTR Magyar Kft in August 1992. A manufacturing plant was established in Hungary the next year. This would become Phoenix Mecano's most important production facility. Located southeast of Budapest at Kecskemet, it employed 670 people by 1999. A variety of components, including plastic casings and electric motors, were assembled there.

By 1995, turnover had reached SFr 316 million, which produced a SFr 30 million net profit. The Casings division accounted for a little less than half of sales; next largest was mechanical components, followed by electromechanical, both of which were increasing in importance.

A German inductive components producer, Bauelemente Götz-Udo Hartmann Group, was acquired in 1998. GU Hartmann, which had a factory in Tunisia, had sales of more than DM 15 million a year.

1998–2002

Phoenix Mecano acquired the remaining shares (26 percent) of RK Rose + Krieger toward the end of 1998. By this time the unit, which produced mechanical modules, had annual sales of SFr 50 million, making it one of Phoenix Mecano's biggest units.

The company's U.S. unit, Phoenix Mecano Inc., acquired a former Kinney Shoe plant in West Virginia in 1999, reconfiguring it to produce electrical components. Phoenix Mecano acquired an 80 percent interest in a Romanian tool and molds business in December of that year. The business was a part of the state-owned company Flaro of Hermannstadt (Sibio). It had 70 employees. Phoenix Mecano aimed to benefit from Romania's much lower labor costs; the group had a total of 700 employees in Hungary. The Flaro unit was renamed Phoenix Mecano Mould after the purchase.

Telecom Investments in 2000

Phoenix Mecano management then perceived a growing need for electronics enclosures in the telecommunications industry. OMP Officina Meccanica di Precisione S.R.L., an Italian manufacturer of casings for telecom infrastructure, was acquired in July 2000. OMP had 200 employees at the time; 1999 turnover was SFr 50 million.

In October 2000, the company acquired France's Twinbay S.A., which had 42 employees. Consolidated sales rose more than 22 percent in 2000.

Phoenix Mecano acquired a 30 percent interest in Hartmann Elektronik GmbH in January 2001. Hartmann Elektronik produced backplanes, or circuit boards for rack-mounted electronics. It had 26 employees and sales of EUR 5.7 million. Phoenix Mecano acquired the remaining 70 percent of Hartmann Elektronik shares in April 2002.

Phoenix Mecano posted a EUR 5.0 million (SFr 8 million) profit on consolidated gross turnover of EUR 342 million in 2001. Phoenix Mecano cut 400 jobs during the year. The company then had 4,000 employees; 1,400 were located in Germany. Hungary and Romania accounted for another 900.

Phoenix was by far the European market leader in standard aluminum, plastic, and fiberglass casings; machine control panels and suspension arm systems; clamping components; and coding switches. Phoenix also dominated the world market for twin linear drives for beds and slatted bed frames.

2001–2004

After nine years as managing director, Peter E. Rued resigned in October 2001 due to disagreements over the company's strategic direction. He was replaced by Benedikt Goldkamp, son of Chairman H. Christian Goldkamp, who was guiding a restructuring of the company. The electronic contract manufacturing arm was most affected. The restructuring program cost EUR 9 million (SFr 13 million).

Posting Its First Loss in 2002

Phoenix Mecano opened a new HUF 1.5 billion facility in central Hungary in March 2002. The Hungarian subsidiary, which had annual sales of HUF 17 billion, then employed 820 people; the new site added another 100 jobs. By this time, Phoenix Mecano also had begun to tap Asia's low-cost labor market as well, setting up a facility in Shanghai to produce electrotechnical components for southeast Asian markets.

Phoenix Mecano posted the first annual loss in its history in 2002, as consolidated turnover fell 5.3 percent to EUR 324 million. This resulted in a net loss of EUR 38.3 million (SFr 56 million) versus a EUR 5 million profit the previous year. Turnover was down in all four divisions: Enclosures, Electrotechnical Components, Mechanical Components, and Electronics Contract Manufacturing. Management attributed the loss to terrible global economic conditions and the writing off of goodwill.

Management's optimism for 2003 appeared justified by the end of the first nine months of the year. Continued positive results were anticipated for 2004.